Locked-In Retirement Account (LIRA)

A Locked-In Retirement Account (LIRA) is a Canadian retirement savings vehicle designed to hold pension funds that have been transferred out of a registered pension plan (RPP), usually when an individual leaves a job with a company-sponsored pension. Unlike regular RRSPs, funds in a LIRA are locked-in by law and cannot be withdrawn in cash before retirement, except in very limited circumstances.

LIRAs are individual accounts and are governed by provincial or federal pension legislation, depending on the original pension plan’s jurisdiction. The funds can be invested similarly to RRSPs and grow on a tax-deferred basis.

At retirement, a LIRA must be converted into a life income fund (LIF), locked-in retirement income fund (LRIF), or life annuity, depending on the applicable rules.

Key Features of a LIRA

‍Important Considerations

• ‍‍Early withdrawals are only permitted under specific hardship conditions or low account balances, and subject to applicable legislation.
• A LIRA cannot accept regular contributions—only locked-in pension transfers.
• The choice of conversion option (LIF, LRIF, or annuity) affects retirement income flexibility and longevity risk.

Summary
A Locked-In Retirement Account (LIRA) helps preserve pension savings when leaving a job, providing tax-deferred investment growth and ensuring the funds are used for retirement income. While more restrictive than RRSPs, LIRAs are an important part of Canada’s pension transfer landscape and offer security for long-term retirement planning.